Grassley, Thune: Energy Department’s electric car loan caters to the 1 percent

Two Republican senators are bashing the Energy Department for using taxpayer funds to support production of a luxury electric car that costs six figures.

Sens. Chuck Grassley (R-Iowa) and John Thune (R-S.D.) are the latest GOP lawmakers to raise questions about federal support for Fisker Automotive.

{mosads}The company in 2010 won approval for up to $529 million in Energy Department (DOE) loans for two projects.

The smaller portion, $169 million, supported U.S. engineering and design work for the roughly $100,000 Fisker Karma, which is manufactured in Finland.

In a letter to Energy Secretary Steven Chu released Monday, the senators question whether a 2007 energy law that created the loan program for advanced vehicle manufacturing should support such a pricey ride.

“The statute which created the [Advanced Technology Vehicles Manufacturing (ATVM)] program did not specify a retail price range for vehicles that are financed by federal dollars, but it would seem questionable how financing $100,000 luxury class automobiles would be the best use of taxpayer money,” the senators write in the letter, which is available here.

The second, larger portion of the funding was to support a project to build a separate and less costly plug-in vehicle, now called the Atlantic, at a former GM plant in Delaware, a plan slated to employ 2,500 people.

That car will retail for around $50,000, but the Delaware project has been delayed and faces uncertainties, and the company has not drawn all of the funding.

The company must meet more “milestones” to draw more of the money, according to DOE. The company has drawn $193 million of the DOE loan funding thus far, according to press reports.

The Grassley-Thune letter to Chu questions the portion of the funding that supported the overseas manufacture of the Karma model, even though the money was used for U.S.-based work.

It also asks a series of other questions about the funding for the two Fisker projects, such as what “technical expertise” the Energy Department brought to bear in evaluating, granting and monitoring the loan to Fisker.

A DOE spokesman did not provide immediate comment on the GOP senators’ April 20 letter.

But the department’s public affairs chief, in a blog post last October, defended the Fisker financing despite delays in the Delaware project, as well as the $465 million loan for Tesla Motors, a California-based manufacturer of high-performance and costly electric vehicles.

Dan Leistikow, the DOE official, struck back. “Critics have complained that the first vehicles introduced by Fisker and Tesla are more expensive, high-end vehicles.”

“This complaint misses the mark in several respects. First, both manufacturers plan to start with high end vehicles and then quickly move to more affordable product lines,” Leistikow wrote in October.

“These are start-up companies that intend to grow over time, so they are following a common pattern for emerging companies: starting with a premium product for a smaller customer base, and eventually moving to lower cost, mass marketed products as they gradually scale up operations,” he added.

Leistikow also noted that other loans under the ATVM program have supported less expensive vehicles. Ford and Nissan have received the largest loans under the ATVM program.

But Grassley, in a statement, questioned the DOE support for Fisker.

“It’s important to know what went into the Energy Department’s decision to fund the production of expensive luxury vehicles. The riskiness of loans to companies that may or may not be able to pay them back deserves scrutiny. The taxpayers can’t and shouldn’t have to subsidize these decisions,” he said in a statement Monday.

Update: An Energy Department spokesman defended the loan program and the Fisker support specifically in a statement to The Hill.

“The Department’s loan program invests in advanced hybrid electric vehicles because they have the potential to significantly improve performance and fuel economy for American consumers. Our loans and loan guarantees have strict conditions in place to protect taxpayers,” spokesman Damien LaVera said Monday.

Addressing the Fisker project, he added:

Our loan documents require borrowers to meet certain milestones and other conditions prior to receiving loan proceeds. As has been widely reported, Fisker has experienced some delays in its sales and production schedule — which is common for start-ups. As Fisker works through those issues and incorporates lessons learned from the production of the Karma, the Department is working with Fisker to review a revised business plan and determine the best path forward so the company can meet its benchmarks, produce cars and employ workers here in America.

DOE is also defending the $169 million portion of the loan that supported the Fisker Karma that’s manufactured in Finland, noting it backed U.S.-based engineers who developed the tools, equipment and manufacturing processes.

Also, more than 45 percent of the components of the Fisker Karma are manufactured by roughly 40 suppliers in the United States, according to DOE.

—This post was updated at 6:07 p.m.